Measure will deter borrowers from erasing debt

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WASHINGTON — If you’re a debtor who has amassed unpaid bills, life is about to get tougher for you. The House of Representatives Thursday passed the most complete revision of bankruptcy law since 1978.

Voting for the bill were 229 Republicans and 73 Democrats. Opposing it were 125 Democrats and one independent, Vermont's Bernard Sanders.

The bill will be promptly signed into law by President Bush.

On Wednesday night when the House Rules Committee adopted a “closed rule” not permitting any amendments to be offered on the House floor, Rep. Louise Slaughter, D- N.Y. denounced GOP leaders for not permitting such amendments as one to exempt soldiers in Iraq from the means test.

Most of the new law's provisions take effect 180 days after Bush signs it. The law will require thousands of debtors who would, under current law, be allowed to wipe out their debts when they filed for Chapter 7 bankruptcy to instead enter Chapter 13 and work out a plan to repay their creditors.

The bill applies a means test: if a debtor earns less than the median income in the state where he lives, then his case will remain in Chapter 7, where, after he gives up certain property that he owned at the time of filing for bankruptcy, his debts will be cancelled.

The means testing provisions would not apply to disabled military veterans if their indebtedness occurred during a period when they were on active duty.

The law will also make a debtor wait eight years, rather than the current six years, before filing a new petition to erase his debt.

The Senate passed the bill on March 10. At the time, 25 senators, all of them Democrats, voted "no." Every Republican voted for it, as did 18 Democrats, including Senate Minority Leader Harry Reid .

Bipartisan accord
The political curiosity here is that both Reid and House Majority Leader Tom DeLay — who agree on very little else — were both enthusiastically taking credit for the bill Wednesday.

"We’ve done a good job this year. In spite of the so-called partisanship, we’ve moved two pieces of legislation that have been around for 15 years, class action (reform) and bankruptcy," Reid told reporters when asked whether partisan animosity was slowing the Senate's work. Alluding to the bankruptcy bill and other legislation, Reid said, "We’re moving along well."

Reid made his comments at the end of a press conference in which he and House Democratic Leader Nancy Pelosi denounced DeLay for alleged unethical conduct and intimidation of federal judges.

Just a few hours later DeLay told reporters, "the bankruptcy bill has been several years in the making, but the final product is worth the wait."

Finance and credit card companies, who have urged the bill’s passage, tend to prefer Republican candidates. According to the non-partisan Center for Responsive Politics, such companies contributed $7.8 million in campaign contributions during the 2004 election cycle, with nearly two-thirds of that money going to Republicans.

Opposed by Democratic constituencies
But the bankruptcy bill is adamantly opposed by Democratic constituencies including labor unions, women’s groups, and consumer groups.

The grass-roots Democratic group Moveon.org raised more than $570,000 to air radio ads in districts of those representatives who were wavering on the bill. The bill "would make it impossible for folks who have been dealt a bad hand to get a clean start," Moveon.org told its members in an e-mail Monday.

"In a betrayal of middle class families, as many as 90 Democrats may also vote the wrong way," the group noted, warning that "there are serious consequences for hurting Americans in order to help the nation's credit card companies."

So why are Reid and other congressional Democratic leaders such as New Democrat Coalition chief Rep. Ellen Tauscher, D- Calif. supporting it?

In an interview Thursday off the House floor, Tauscher said, "Suffice it to say, I would much prefer a Democratic majority that would write a better bill. I would much prefer tighter restrictions on the credit card industry, I would much prefer many different things, but we are not in the majority."

California Democrat explains support
She added the bill would benefit her constituents who "work hard, pay their bills, live within their means." They "don't appreciate having to pay higher costs for everything because there are Americans who abuse bankruptcy provisions that exist now that create loopholes. And they are absolutely forgiven for mounting up tens of thousands of dollars of debt so they can go off and do it again."

Tauscher mentioned that she had been "threatened" by members of her own party for supporting the bill. She said it is "pathetic" to think "that we should be attacking each other. Let's keep our eye on the real foes here: the Republican majority who don't write good legislation and don't provide the minority the chance to offer alternatives."

Tauscher's Democratic colleague from across San Francisco Bay, Rep. Zoe Lofgren, said Thursday, "It's a terrible bill." Lofgren noted that Republicans in the Rules Committee would not permit her to offer an amendment that would have protected "individuals whose debt is provably tied to overwhelming medical expenses."

Lofgren also said that the bill's state median income means test would hurt her constituents in Santa Clara County. While the California median individual income is $32,000, the median income for a family of four in Santa Clara County is about $80,000 (compared to about $68,000 for the state). The median-priced Santa Clara County home costs $650,000. Some people in the county are struggling even at $80,000.

"If Nancy Pelosi were speaker of the House this bill would not be on the floor," Lofgren said.

Some Democrats frustrated
The imminent enactment of the bill has left some grassroots Democrats frustrated and determined to exact retribution.

“Clearly there are some Democrats and many Republicans who place the interests of corporations above those of citizens,” said David Swanson, an activist with Progressive Democrats of America, who organized the anti-bankruptcy bill web site, DebtSlavery.org.

Swanson said, "Sen. Reid has been terrific on some issues" — he cited his attempt to preserve judicial filibusters — "but absolutely inexcusable" on bankruptcy.

He said "a lot of people are going to remember" how Democratic senators and House members voted on the bankruptcy bill and predicted that "absolutely" there will be primary challengers in 2006 to some of the Democrats who voted for the bill. "If we’re not willing to challenge Democrats who act as Republicans, then we’re not going to have a Democratic Party worth fighting for."